A New Hedge Fund Is Betting On Bitcoin Adoption--And Has The Data To Back It Up

Bitcoin and cryptocurrency prices have stagnated so far this year, despite repeated predictions a bitcoin "bull run" could be just around the corner, but declining prices are obscuring an underlying growth in adoption and institutional infrastructure, according to new San Francisco and Singapore-based hedge fund Circuit Capital.

Bitcoin prices have sunk some 70% from their peak at the turn of the year, which saw bitcoin rocket to a staggering near-$20,000 before falling to around $6,000 in September—where it has wallowed since.

Bitcoin adoption and institutional investment are seen as two key metrics the cryptocurrency's price is based on. Photo by Omar Marques/SOPA Images/LightRocket via Getty Images)

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Many bitcoin and cryptocurrency investors and traders are awaiting news from regulators or around growing institutional adoption before deciding whether to pour more money into the sector. Circuit Capital is, however, arguing the fall in bitcoin price over the last 10 months has obscured the growing use of cryptocurrencies among consumers and investors.

"Despite what is happening with prices, we’re seeing adoption growing and a lot of people are looking to scale crypto businesses," Circuit partner Eugene Ng told Bloomberg. "We are starting to see talent moving into this space and institutional infrastructure developing."

Circuit is planning to launch in the first quarter of next year after raising $30 million and another of its four partners, former technology stock analyst Bo Nam, said he expects Circuit will grow its assets to over $100 million.

The bitcoin price plummeted in September to around $6,000 and has so far failed to recover.

CoinDesk

Circuit has meanwhile developed a bitcoin and cryptocurrency index that measures mainstream adoption of the blockchain technology that supports digital assets—which it is basing its bold prediction on.

The benchmark, based on more than 10 data points including the number of active crypto wallets, transaction volumes, computing power, web searches for bitcoin terms, and industry hirings, shows bitcoin and crypto adoption is on an upward trajectory.

Bitcoin and cryptocurrency Google searches have tracked the rise and fall in prices over the last 18 months.

Google

In an October blog post, Circuit's Ng outlined what he thinks is holding the bitcoin and cryptocurrency market down.

"The following fundamental drivers could explain why crypto has not been able to react to any positive headlines for the past six months," Ng wrote. "Fund redemptions, retail community not participating, funds buying via equity not ICO, institution-grade market infrastructure not ready for institutions to fear-of-missing-out, potential rehypothecation issue (#FakeGoodNews), and smart money shorting."

"The most compelling market narrative for the next bullish cycle is that institutions will be the main catalyst driving the market. For these traditional entities to gain direct exposure to crypto, they have to be able to trade, settle and store assets in an institutional-grade environment.

"I am excited for 2019 because the foundations for a marketplace will be laid. The buildout of this infrastructure will grow alongside clarity in regulations and regulated investment product offerings that will bring massive inflows of capital."

Changpeng Zhao, often known by his initials CZ, said that while bitcoin and cryptocurrency trading on Binance, the world's largest exchange by volume, is down almost 90% from January he still feels the company and the wider market are healthy.